In an effort to attract and retain high-performing companies, the San Diego City Council this week revamped its 25-year-old Business and Industry Incentive Program, which provides substantial development and business incentives for private capital improvement investments. Entrepreneurs throughout the region will want to make themselves familiar with the new program.
The original program—which helped incentivize larger companies like Ballast Point Brewing Company and Ale
Smith Brewing Company to keep their businesses in San Diego—was intended to attract and retain major revenue and job-generating projects throughout San Diego. However, in light of significant changes within the local economy, concerns about the program’s effectiveness for small and mid-sized start-ups, and new research in economic development best practices, the San Diego City Council voted to replace the original program with a new economic growth program called the Business Incentive Program (“BIP”). The BIP is a significantly different approach to helping San Diego retain and recruit high-performing companies, including small and mid-sized start-up companies, with strong potential for business growth while prioritizing companies committed to supporting San Diego’s workforce, sustainability and economic goals.

When implemented, the BIP will authorize the Mayor to award qualifying businesses one or more of the following development and/or business incentives:

Payment of City Development Fees, including payments on behalf of a company for qualified plan check fees associated with development, building permits and ministerial and discretionary processes.

Dedicated Technical Support by City staff in securing City permits and approvals, assistance with preliminary reviews, and advance due diligence for a project under consideration, above the typical 120 staff hours allocated to one project during a single fiscal year.

Secured and Unsecured Financing Assistance through City loan programs with specialized rates, terms and payment options.

Workforce Development through payments made directly to a company to support hiring or training employees through an existing program offered by the San Diego Workforce Partnership or another program identified in the BIP.

To qualify for BIP incentives, a company must, among other things, be considered a “Base Sector Firm.” Base Sector Firms are companies in an industry that produces goods, services, or both, that are customarily sold outside of the region. In the City’s view, a key characteristic of a Base Sector Firm is its ability to move all or a significant portion of its operations to another region without impacting the company’s revenues or negatively impacting its customer base. Companies that demonstrate a viable plan to possess these key characteristics within a two-year period following the date of the company’s application for a BIP incentive may also be considered a Base Sector Firm.
In addition to being a Base Sector Firm, the company must demonstrate a viable plan and commitment to accomplish one of the following goals:

(1) Create or retain at least 10 jobs in the City for a minimum of three years after the incentive award date, or (2) within two years after the BIP incentive award date, create or retain at least 10 jobs for a minimum of three years that pay between 80% and 120% of Average Median Income.

Create or retain at least 3 of the jobs described above, but located within the San Diego Promise Zone, San Diego Opportunity Zone, or a Low and Moderate-Income Census Tract.

Complete a new capital investment of more than $5,000,000 to retain, expand or attract a company, or its workforce, products, services, facilities, or general operations within the two-year period immediately after the incentive award date.

In addition to the incentives outlined above, the City will consider providing an increased level of incentives to any qualifying company that meets additional criteria to help reach the City’s goal to support workforce, sustainability and economic goals.

To be eligible for the BIP, an application must be submitted and reviewed by the City’s Economic Development Department staff. City staff will then make a recommendation to the Mayor based on consideration of certain public benefits including (1) the cost of the incentive(s) compared to the economic benefits that the project is expected to produce; (2) the impact of the project on the City’s tax base and revenue; (3) a determination the project is not expected to shift economic activity from one area of the City to another; and (4) analysis of whether the project would proceed if the Incentive(s) were not provided. Incentives more than $100,000 must also be approved by the City Council.

Justine K. Nielsen is a Senior Associate at Procopio and a member of its Real Estate team. She represents private entities and public interest groups on a variety of land use, planning and entitlement matters throughout various stages of the real estate development process. She also focuses on due diligence prior to acquisition, amending general plans and other related statutes. Sara G. Neva is an Associate at Procopio and a member of its Real Estate team. She counsels clients on real estate, finance and general business transactions. Her practice involves real estate property purchase and sale, commercial leases and easements, joint venture formation and other equity investments, financing, land use and entitlements.

About the Author: Justine K. Nielsen is a Senior Associate at Procopio and a member of its Real Estate team. She represents private entities and public interest groups on a variety of land use, planning and entitlement matters throughout various stages of the real estate development process. She also focuses on due diligence prior to acquisition, amending general plans and other related statutes. Sara G. Neva is an Associate at Procopio and a member of its Real Estate team. She counsels clients on real estate, finance and general business transactions. Her practice involves real estate property purchase and sale, commercial leases and easements, joint venture formation and other equity investments, financing, land use and entitlements.